Mahathir, who is 92, led a four-party coalition to end the six-decade rule of Najib Razak’s party.

Investors had been betting on Najib retaining power, and Mahathir’s return to office 15 years after he stepped down as prime minister injects more uncertainty into financial markets and the economy at a time when emerging markets are under attack globally.

Here’s a look at what else the election outcome means for economic policy and markets.

What were Mahathir’s main policy pledges?

Abolishing a 6% goods and services tax (GST) was a key campaign promise, which Mahathir promised to do within 100 days of taking office. The tax, which was introduced in 2015, is widely blamed by citizens for their rising living costs. The opposition coalition said it would replace the GST with a sales and services tax that’s more fair.

The coalition promised to re-introduce petrol subsidies, which could be a boon for consumption as the new government eyes a 6% growth goal. It also campaigned to increase petroleum royalties to oil-producing states and raise minimum wages.

What does it mean for the economic outlook?

Malaysia’s economy is enjoying a strong rebound at the moment, with growth surging to 5.9% last year and forecast by the central bank to reach 5.5% to 6% in 2018. Most of that recovery has come on the back of a pick-up in global trade and rising domestic demand. But with trade tensions dominating this year, and exports accounting for two-thirds of GDP, there are risks to Malaysia’s outlook ahead.

Moody’s Investors Service said there’s lack of detail on the electoral pledges, but some campaign promises would be "credit negative" for Malaysia. In particular, scrapping GST without any measures to offset the loss in revenue would increase the economy’s reliance on oil income and narrow the government’s revenue base, the ratings company said. Najib had said abolishing the 6% GST would add 416 billion ringgit ($105bn) to the nation’s debt.

A move on GST and a return of fuel subsidies would put pressure on the budget deficit, which Malaysia has steadily brought down to 3% of GDP.

Malaysia should also brace for a "sharp slowdown in investment growth" if Mahathir’s positioning against Chinese involvement in infrastructure prompts a stalling of those projects, according to Capital Economics.

The coalition promised to re-introduce petrol subsidies, which could be a boon for consumption as the new government eyes a 6% growth goal

Longer term, proposed changes to education policy have an outside chance of lifting potential growth in Malaysia, according to economists at Morgan Stanley. Mahathir’s coalition campaigned on free tertiary education at public universities and a bigger boost to technical and vocational training.

Does this change the monetary policy outlook?

The central bank’s policy decision on Thursday was all business as usual, with Bank Negara Malaysia holding its benchmark rate at 3.25%, in line with the forecasts of all 18 economists surveyed by Bloomberg. After moving early with a January rate hike, economists don’t expect another change anytime soon.

Inflation has been relatively benign, slowing to 1.3% in March, with a stronger currency since last year helping ease price pressures. The government had forecast average inflation of 2.5% to 3.5% for this year.

What does the upset win mean for currency policy?

The manifesto by Mahathir’s coalition said it will give a mandate to the central bank to develop a strategy to return the ringgit to its actual potential within three years. Mahathir retains a wariness of currency traders and has warned that he’ll be willing to re-introduce a peg on the ringgit to ward off "currency manipulators" if necessary.

In the aftermath of the 1998 Asian financial crisis, then-prime minister Mahathir imposed capital controls and rejected a bailout from the International Monetary Fund (IMF), raising the ire of investors. "It will be an interesting, but unsurprising, development if those instincts reappear this time around," economists at DBS Group said in a note.

The ringgit is the best-performing currency in emerging Asia this year, strengthening 2.5% against the dollar.

What does this mean for the stock market?

The uncertainty following the surprise election result will boost volatility and prompt re-positioning of Malaysian assets by investors, analysts said. Christy Tan, head of markets strategy at National Australia Bank in Singapore, said markets are in for a "rough ride as this was the least priced-in scenario" and "while the result is cheered by Malaysians, this means more uncertainties for international investors".

The FTSE Bursa Malaysia KLCI Index of shares is the third best-performing major emerging Asian benchmark this year as the pre-election rally sent the measure to a record high. With the onshore market closed because of public holidays declared on Thursday and Friday, the knee-jerk sell-off could well be more pronounced in offshore trading, according to Tan.

The iShares MSCI Malaysia ETF dropped 6% to $32.42 in the US, the lowest since December.